MIDF Research revised its earnings estimates to mirror the current projection.
PETALING JAYA: Malaysia Marine & Heavy Engineering Bhd’s (MMHE) order book of RM5.7bil is expected to support its earnings growth for the financial year 2024 (FY24) and FY25.
There is also no likelihood of further instances of cost provisions going forward, according to RHB Research.
The group’s tender book had dwindled to RM2bil to RM3bil compared with RM5bil to RM6bil in the second quarter of 2023 (2Q23).
The research house is not unduly worried about the drop, given the current projects on hand are able to provide earnings visibility up to FY25.
However, for the marine business, the research house expects softer quarters given that demand for dry-docking activities is likely to be slower in the upcoming winter.
The current utilisation for dry dock (DD) 1, DD2 and DD3 are 35%, 39% and 31%, respectively, it added.
Meanwhile, MIDF Research said MMHE’s 3Q23 revenue dropped 23.5% year-on-year (y-o-y) to RM68.2mil, while earnings were down by 74.2% y-o-y to RM4.4mil.
The weaker revenue was due to a lower number of vessels secured.
It was also due to doubtful debts being recovered in 3Q23, the research house added.
Additionally, the weakening ringgit against the US dollar had affected the pricing of materials and services.
The writeback for the projects would be present as earnings had improved on a quarterly basis.
MIDF Research revised its earnings estimates to mirror the current projection.
The research house forecast lower profit margin for the group’s marine segment in 3Q23 by 13%, which is expected to prolong until the winter season, as well as the continuous losses in the heavy engineering (HE) segment.
It also acknowledged the risk of inflation on raw material prices, as well as the one-off challenge from the upcoming winter season on the group’s shipyard activities.
RHB Research has widened MMHE’s FY23 net loss forecast by 14.8% to RM136.3mil from RM118.7mil previously, in accordance with the higher-than-expected HE cost provisions.
The research house also retained a “buy’’ call with a target price (TP) of 60 sen, while MIDF Research had a “neutral’’ call with a TP of 51 sen a share.
